PPPFA bill

On June 5, 2020 the President signed the PPPFA bill into law. The bill was designed to address some of the concerns of the previous Payroll Protection Program (PPP) law from March.

The new law increases the non-payroll portion from 25% to 40% but requires that the business spend at least 60% of the loan proceeds for payroll costs. A company will not qualify for any forgiveness at all because it failed to meet the 60% test.  

The original law utilized 8 weeks (56 days) from the date of receipt of a PPP loan to qualify for forgiveness if spent on qualified payroll and other expenses. The new law allows a choice for a 24 week measurement period, ending no later than 12/31/2020 for the forgiveness measurement period. The law does allow businesses with PPP loans obtained prior to June 5, 2020 the option to use the original 8 week measurement period.

The old law penalized an employer that was unable to re-hire employees by June 30, 2020 by applying a “forgiveness reduction penalty” based upon the percentage of non-rehired employees by June 30, 2020. The new law now allows employers to utilize a rehire date by December 31, 2020. The maximum compensation per employee is still limited to $100,000 annually. New exceptions to the rehire penalty are also provided if the employer can demonstrate that they did not return to the previous level of business.

The old law required a 2 year repayment term with an initial delay of the first payment until 6 months from the loan date. The new law allows a 5 year repayment term with the initial delay occurring for 6 months from the date the SBA makes the determination on loan forgiveness. Please be advised that interest is accrued from the time received and not forgiven.

The new law allows PPP loan recipients to delay their 941 deposits under the guidelines of the old law.

Many thanks to Bob Jennings in being our Tax Speaker and representing all of us before Congress with his very direct correspondence!